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Sri Lanka tax revenues drop 26-pct by April 2020 budget, Rs200bn printed

ECONOMYNEXT – Sri Lanka’s tax revenues dropped 26 percent to 408.5 billion rupees up to April 2020 and the finance ministry has halved capital spending to keep total spending below last year in the same period, amid a fiscal and monetary stimulus compounded by a Coronavirus crisis, data shows.

Total revenue was down 20 percent to 476.8 helped by non-tax revenues which grew 53 percent to 68.2 billion rupees helped by a 24 billion rupee central bank profit given as new liquidity.

Current spending grew 9 percent to 820 billion rupees.

The finance ministry slashed capital spending by 48 percent to 110.2 billion rupees, keeping total spending at 930.9 billion rupees, down from 961.9 billion rupees last year.

The overall deficit after grants rose 24 percent to 452 billion rupees or about 2.9 percent of the estimated gross domestic product for the year, up from 2.4 percent last year.

The four month deficit is line with 8.5 percent or about 1.3 trillion rupees forecast for the full year.

The deficit was financed with 26 billion rupees in foreign finance and 425 billion rupees in domestic finance.

Of that about 200 billion rupees came from central bank financing, shows. Net credit government from the central bank rose from 363 billion rupees to 565.8 billion rupees from December to April 2020, central bank data show.

The central bank has said it printed 50 billion rupees on March 13, another 50 billion rupees on March 23 for an ‘energy fund’, another 50 billion rupees on April 03 for salaries.

In addition money has been advanced to banks via re-finance and SRR cuts which can be used to buy bonds, but do not come up in numbers as central bank credit.

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However the effects of all injection on the rupee is the same when private credit is strong. In April private credit fell which tends to reduce pressure on the currency.

Sri Lanka is also in talks with the International Monetary Fund for a program under its Rapid Finance Instrument, and several other lenders, including the Asian Development Bank, France and China.